Scientific Applications & Research Associates v. International

Background

SARA’s lawsuit alleges that Zipline infringed U.S. Patent No. 7,606,115, misappropriated trade secrets, and breached a nondisclosure agreement. Zipline asserted six counterclaims seeking to invalidate the ’115 patent based on alleged inequitable conduct—improper failure to disclose material references to the United States Patent and Trademark Office during prosecution of that patent.

SARA asserted an “unclean hands” affirmative defense. It alleged that Zipline had also failed to disclose references or material information while prosecuting its own patent applications covering subject matter identical to the ’115 patent. Zipline moved under Federal Rule of Civil Procedure 12(f) to strike that defense.

SARA also sought to enforce nonparty subpoenas directed to Sequoia Capital Operations, LLC, Katalyst Ventures Warehouse GP, LLC, and AH Capital Management, LLC. The investors had produced memoranda documenting their reasons for investing in Zipline. SARA sought additional materials, including documents used to assess Zipline’s value, internal analyses, projections, and opinions of counsel. SARA separately filed administrative motions to seal documents submitted in connection with the subpoena motions.

Motion to Strike

The court held that SARA’s unclean-hands defense did not sufficiently connect Zipline’s alleged conduct to Zipline’s inequitable-conduct counterclaims. First, the defense did not give Zipline fair notice because it identified alleged failures to disclose information to the Patent Office, while SARA argued that it had not alleged inequitable conduct before the Patent Office.

More importantly, the court found that the alleged conduct involved Zipline patent applications that were not at issue in the lawsuit and had not yet resulted in patents. Zipline’s counterclaims concerned SARA’s prosecution of the ’115 patent. The court concluded that SARA had not identified authority suggesting that alleged disclosure failures involving patent applications outside the litigation could excuse alleged inequitable conduct involving the patent asserted in the litigation.

The court therefore granted Zipline’s motion to strike SARA’s unclean-hands affirmative defense. After asking what additional facts SARA could allege if amendment were allowed, the court found that SARA had not identified facts that could make the defense plausible. The court struck the defense without leave to amend.

Motions to Enforce Nonparty Subpoenas

The court explained that discovery from nonparties must concern nonprivileged information relevant to a claim or defense and proportional to the needs of the case. Courts may limit discovery when it is obtainable from a more convenient or less burdensome source, when its burden outweighs its likely benefit, or to protect third parties from harassment, inconvenience, or disclosure of confidential documents.

The court found that SARA did not show how the additional investor documents were relevant to liability, patent validity, independent economic value, damages, injunctive relief, or corrective advertising for unfair competition. SARA had not persuasively explained how the investors’ independent evaluations of Zipline, beyond the materials already produced, were relevant to a claim or defense. The court also found that SARA did not connect its argument about Zipline’s potentially inflated projections to a specific damages theory, claim, or defense.

The court accordingly denied SARA’s motions to enforce the nonparty subpoenas for failure to establish the relevance of the requested additional material.

Sealing Motions

The court noted the strong presumption favoring public access to judicial records but applied the “good cause” standard because the documents were attached to discovery motions unrelated to the merits of the case. The nonparties established good cause because the documents reflected their internal business analyses.

The court granted the administrative sealing motions, and the identified documents will remain under seal.

Disposition

Judge Jacqueline Scott Corley struck, without leave to amend, SARA’s unclean-hands affirmative defense; denied SARA’s motions to enforce the nonparty subpoenas; and granted the administrative motions to seal. The order disposed of Docket Nos. 122, 126, 127, 128, and 129.